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Investor's Business Daily

Doral Financial Corp. San Juan, Puerto Rico - Bank Grows New York Business By Luring One Client At A Time


March 27, 2003
Copyright © 2003
Investor's Business Daily. All rights reserved. 

One day this month, the owner of a small restaurant in the Bronx walked into the Park Avenue branch of Doral Bank, New York to ask about getting a loan.

Rather than be routed to an account rep on the bank floor, the first-time customer was sent directly to a high-ranking executive of the bank's parent firm.

The parent firm is Doral Financial Corp. The executive, Richard Bonini, is Doral's chief financial officer.

At the meeting, Bonini told the customer about the basic forms needed to apply for a loan. He then introduced him to a lending officer, who took him through the application process step by step.

This kind of handholding is key to Doral's strategy in New York, where it has two branches in Manhattan and one in Queens.

"We really push service," Bonini said. "That's the way we've grown our business in Puerto Rico, and we've carried it over here."

Doral, based in San Juan, is Puerto Rico's No. 1 mortgage lender, with 34 commercial bank branches on the island. It tries to provide service that goes well beyond your run-of-the-mill smiles and nods.

Bonini says that when he works with customers, most of whom are immigrants, he makes himself available to talk with them, discuss their goals and educate them.

A couple of weeks ago, he invited a 70-year customer to his office to counsel on investing in tax-free instruments.

"They've found a major void in the customer service levels (of the large banks)," said analyst Audrey Snell of Brean Murray & Co. "As a result, they've borrowed a page from their own book of service levels in Puerto Rico and are trying to (adapt) it to the U.S."

Much of Doral's recent focus has been in New York. The company is set to add another branch in Queens next month and four more branches in Manhattan's outer boroughs by year-end. Five or six more are slated to open in 2004. It might even expand into other U.S. regions.

"We're considering branches outside of New York ... and when we do, we'd probably go the acquisition route," Bonini said. "Right now there's plenty here in New York, but that doesn't mean we're not looking elsewhere."

Doral's loans are focused on apartment-house owners and construction firms in the moderate-income areas of New York's five boroughs.

Customers have plenty of choices in New York, including a handful of big banks. But analysts say Doral offers a more personal touch by tailoring products and services to different cultures.

The company might offer a different type of small-business loan to residents of the Dominican community than to those in the Greek community, for example. It also staffs its branches with personnel who speak the language of the communities they serve.

This approach has helped Doral expand its share of the New York market despite heavy competition.

At the end of February, Doral Bank, New York's assets stood at $425 million, up from $260 million the prior year. Over that same period, deposits rose to $261 million from $193 million.

Management aims to build Doral Bank, New York's assets to about $1 billion by the end of 2004, Bonini says.

Analyst Snell expects Doral to expand in New York at a pretty good clip in the next three years. She points out that the firm has spent some three years studying the market, assessing locales and possibly taking options on real estate.

Doral has a lot going for it in its home base of Puerto Rico. The firm holds more than 45% of the island's booming housing market, which has benefited from Puerto Rico's growing middle class and ongoing shortage of affordable housing.

Housing demand in Puerto Rico calls for about 100,000 units to be built a year. Only 18,000 to 20,000 currently are being built. If building continues at that clip, the supply backlog would reach at least five years, Snell says.

"(Doral) can derive (lending opportunities) from the backlog in the pipeline," she said.

The company is also building its branch network on the island. It opened four branches there in 2002 and is set to open six more this year.

Most will be full-service financial centers, which offer financial services shopping.

These centers offer loan and deposit banking from Doral Bank, residential mortgage loans, insurance products from its insurance agency unit and securities through an agreement with UBS PaineWebber.

The company's financial returns suggest there's plenty of business out there. It earned $2.84 a share last year, up 51% from 2001. Revenue gained 48% to $407.8 million.

Analysts polled by First Call expect earnings to rise 25% to $3.55 a share this year, then climb 19% to $4.21 in 2004.

Doral plans to extend its accord with UBS to include more equity and fixed-income products, Bonini says.

Its insurance agency is focused on mortgage-related products such as title insurance. Recently the company added optional insurance coverage such as auto, commercial property, medical professional and hospital liability insurance.

Doral also has broadened its mortgage lending target to include a wider range of the housing market, Snell says.

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